On the right road

Meeting Juan Béjar, chief executive of Spanish developer Global Vía, just a short walk away from the Madrid office of his infrastructure alma mater – roads operator Cintra – it’s hard not to be reminded of his accomplishments with Cintra and its parent company, Ferrovial.

Béjar: sees
pipeline blocked by
lack of syndication

After all, Béjar was one of the key figures in Cintra’s international expansion, helping to establish the Spanish company as one the world’s premier toll road operators.

After rising to the helm of that firm in 1998, Béjar oversaw its first big international coup the following year by winning the concession for Canada’s 407 ETR – one of the world’s largest toll roads by turnover and still Cintra’s most valuable asset to this day.

Four years later, Cintra won the Chicago Skyway, which was the first US highway to be privatised and subsequently was successfully listed on the Madrid Stock Exchange. By the time Béjar left Cintra and Ferrovial in 2007, nine years after he started, he had just overseen Ferrovial’s multi-billion pound purchase of UK airports operator BAA.

With such an impressive CV, it’s not hard to understand why the three-year old concessions vehicle of Spanish infrastructure company FCC and savings bank Caja Madrid was keen to hire Béjar: Global Vía, already one of the world’s largest concessionaires, is in the middle of an international expansion of its own and can greatly benefit from a man of Béjar’s talents.

The road ahead

Catching up with Global Vía’s new chief executive roughly a year after he took office finds him busy plotting a course to grow the company while refocusing it as a transportation powerhouse.

“On the one side, we are bidding for new projects as we need to grow,” Béjar explains. “But in parallel, we are trying to reorganise our portfolio, which is very diverse, with 41 concessions in five or six different sectors. We have it very clear in our minds that we would like to concentrate on road and railway projects. So we are running a process of divestment in the other sectors we are invested in and in those concessions where we have minority participations,” he adds.

“My vision for Global Vía is of a company constantly growing its infrastructure business, focused on roads and rail, and having the larger part of its portfolio invested in the Euro zone countries, the US and the UK,” he says, although he is not averse to the occasional investment in an emerging market like India.

The Global Vía of the future, Béjar explains, “will look to have more than 50 percent [in new projects] or at least negative control of the company”. [Negative control is where an extraordinary or special resolution is necessary for any purpose, and a minority of over 25 percent of votes is sufficient to prevent the resolution from being passed.]   

Still, investment plans have to be flexible given the state of today’s markets, Béjar contends. “I think it is impossible for us to see a big number of large projects coming to fruition if the syndications market continues to be closed, as it is today. Even those governments that are preparing a large pipeline of projects will have difficulty until the syndications market reopens,” he argues.

Investment wanted

Another integral part of Béjar’s growth strategy for Global Vía consists of attracting a third-party investor to enter its capital base alongside FCC and Caja Madrid, a process which is in its very early stages.

“At this time, there is not much more to say because we are just in the exploratory arena,” Béjar points out. “We are studying different alternatives which could include listing the company – a hard sell given the current market situation – to just incorporating a third investor, or a group of investors,” he adds, refusing to comment on the amount Global Vía would be willing to sell to an outside party.

Such moves seem to be gaining in popularity: Abertis’ shareholders are in the middle of a well-publicised process to bring European private equity firm CVC Capital Partners into the firm’s capital; EISER Infrastructure recently bought into four transport concessions held by Spanish construction company Sacyr, leaving the door open for future collaborations; and, of course, Citi Infrastructure Investors, which Béjar co-headed before joining Global Vía, bought Sacyr’s former concessions arm, Itinere, in one of 2009’s largest infrastructure deals.

But a successful buyout of Abertis would not necessarily boost Global Vía’s prospects, Béjar argues:

“I think our process will flow independently of what happens with Abertis. We are talking about two completely different companies given the size of their concessions and each one has its own challenges,” he muses. “The only correlation I see is that it doesn’t look like infrastructure investors see any major obstacles in investing in companies with an exposure to Spain,” he concludes.

With over 60 percent of its book value invested in Spain, Béjar claims his company’s exposure to the troubled Spanish market has not been an issue in the talks he has held with potential third-party investors.

Mature tolls paid off

Nor have investors expressed any reservations about Béjar’s intention to refocus Global Vía as a transport concessionaire, despite the beating toll roads have taken in the aftermath of the financial crisis. In fact, considering that more than 30 of its 41 concessions are in roads (24) and rail (6), Global Vía is already well on its way to reaching Béjar’s objective.

“If you look at roads from the point of view of operational performance you will find that mature toll roads have actually done quite well during the crisis,” Béjar argues. “The crisis has mainly affected roads that were in the ramp-up phase,” he says.

“The major complication affecting even mature toll roads has not been operational performance but valuation,” he continues. “Toll road valuations have changed very significantly. Not because of a difference in operational performance,” he hastens to point out, “but because of the difference in the financing conditions surrounding them”.

“Long-term investors looking for stable revenues should still find themselves comfortable with mature toll roads,” Béjar argues. “But those investors that, for one reason or the other, were foreseeing divestment in the short term (say three to five years) may find that their infrastructure investment did not work,” he says.

Still, falling asset valuations have certainly left a bitter taste in the mouths of several toll road developers, with many seeing their assets lose between 30 percent and 40 percent of their pre-crisis value. Does Béjar feel that Global Vía’s roads portfolio is undervalued nowadays?

“No, no, no, I think the markets are always correct,” Béjar emphatically answers. “It's true that markets used to generate higher valuations in the early 2000s than nowadays but the conditions were different. There is now less financing available and investors are demanding higher equity internal rates of return (IRR) for these assets, among other things,” he says.

“I think the fair value of an asset is what you can get for your asset today – that’s its fair value,” he concludes.

Global Vía at a glance
Formed: 2007
Main shareholders: FCC (50%), Caja Madrid (50%)
Concessions: 41
Sectors: Roads (24 concessions); ports (7); railways (6); airports (2); hospitals (2)
Countries: Spain, Andorra, Portugal, Ireland, Mexico, Costa Rica, Chile
Source: www.globalvia.es